It’s interesting to see how the stock behaves exactly the opposite of what we expect due to MMs, max pain and any money they are out to make on push downs. I understand the stock can’t always go up but when it behaves exactly the opposite of common sense, the herd effect of FOMO buying, buy the rumor, sell the news or momentum is not always the main forces at action. That’s the reason I bought May CCs at 1200 strike price last week. In the near term, SP is impossible to predict but I give myself some time for the market to realize I am rightBiggest win: not freaking out during Hertz week and rolling up a month for net credit and having those cc expire worthless
Biggest loss: buying calls the end of the week after p&d thinking that it was short term options manipulation and that the market would really react to how good the results were
Biggest win: not freaking out during Hertz week and rolling up a month for net credit and having those cc expire worthless
Biggest loss: buying calls the end of the week after p&d thinking that it was short term options manipulation and that the market would really react to how good the results were
Hey now, don't lump all calls together. Fronting $40 of time value on a year out call with 0.93 Delta for a 45% discount over owning stock is not a terrible idea (about double the delta per $). Especially if you buy it on a >$40 dip.That’s what you get for sinning
Sell options, don’t buy them (unless it’s to close a position). Option buyers lose money, especially long-term. Option sellers get to keep money.
Option buyers have to guess the right direction and time is their enemy. Option sellers don’t need to be right about the directon (as long as it’s not a huge move) and time is on their side.
Be the house!
This is good to know. I never knew this until reading this post
That’s what you get for sinning
Sell options, don’t buy them (unless it’s to close a position). Option buyers have to pay money and lose most of it, especially long-term. Option sellers earn money and get to keep most of it.
Option buyers have to guess the right direction and time is their enemy. Option sellers don’t need to be right about the directon (as long as it’s not a huge move) and time is on their side.
Be the house!
I just finished updating my trading log and realized that way back on Dec29th, I sold 1/14 -p1050s/-c1050s straddles at $40 & $72, respectively. The calls expired worthless and puts were $0.39 ITM.
I can’t believe that I was that lucky. Would have been 5% in two weeks. Of course, I wasn’t that lucky because I didn’t hold them to the bitter end, rolling out. Still, netted 5x my monthly expenses on just those profits. The calls are closed and the puts are out to 1/28. Hopefully, the puts will expire worthless, but maybe I’ll just roll out another week and pick up another $10.
That’s what you get for sinning
Sell options, don’t buy them (unless it’s to close a position). Option buyers have to pay money and lose most of it, especially long-term. Option sellers earn money and get to keep most of it.
Option buyers have to guess the right direction and time is their enemy. Option sellers don’t need to be right about the directon (as long as it’s not a huge move) and time is on their side.
Be the house!
Traditionally and historically options buyers are dumb retail money. Selling options has been the domain of the Lords of the Market (market makers) and smart big money, a lot of it insider money (inside the system that is WS, not insider as in companies).
). I have an account at Citibank where despite my experience and scorching returns over the past four years (thank you TSLA) I am not allowed to sell put options unless I call and speak to a person. Ridiculous. I have a trust account I funded recently at JP Morgan and asked to be set up to sell CCs and again I was told this would only happen with a live person on the phone (WTF?! Please tell me that up front...).
Selling LEAPs is rarely done around here. I and others have done our own analysis that shows it significantly underperforms (ie<50%) selling shorter term options, eg weeklies. You are effectively locking in a premium at a fixed distance from the current price, at the current IV. Whereas selling weekly premiums you are matching the strike prices and premiums to the current weekly stock price and IV range. This closer matching allows for much higher premiums to be achieved overall and ongoing risk management. It does take more work than the set and forget/hope of selling LEAPS, but some of us also enjoy the weekly/fortnightly cut and thrust. If you move from selling straight CC's to spreads then the premiums will typically be much greater.
I would like to see data comparing weekly (which I do) and LEAP covered calls. Clearly, the premiums are higher for weeklies, but if you take into account offsetting costs to close in case of sudden SP rises whether large or just to roll, I wonder if the gap remains over time?
The rule of thumb is that if you sold them you should have bought them and if you bought them you should have sold them.
I know we don't have our own Moderators Posts of Merit thread here but if we did..... This would definitely make it in.Traditionally and historically options buyers are dumb retail money. Selling options has been the domain of the Lords of the Market (market makers) and smart big money, a lot of it insider money (inside the system that is WS, not insider as in companies).
WS makes buying options very easy. I can open an account for 1,000 USD and put it into options immediately (and probably lose it just as fast). The spectacular percentage returners are ALWAYS buys. Just last week bought fifty cent QQQ options expiring the same day that I unloaded for a 200% return. If I had held I would have made over 1,000% on the SAME day. This makes for fantastic advertising. It is like selling lotto tickets. 'Dumb' money tends to be looking for the huge fast returns. There is a lot of dumb money out there. Most options buyers are gamblers. They are not going away anytime soon, unless maybe it is to Draft Kings.
Dumb money is always told over and over how dangerous it is to sell options (my 'financial advisor' at CITI just told me the same thing a couple of weeks ago - and I was talking to him about covered calls!
WS makes selling options very hard. You have to have a relatively huge capital base, either in cash or in equity for it to be worth it. Sells can only make 100% and are liable for theoretically huge or infinite percentage losses (which you are reminded of constantly). You have to know how to manage your margin and risk or you can blow up your account and even be left owing money to the house. And even if you know all this and are good with it, see my above experience with two of the largest banks in the world (granted I can move the money... what a pain in the ass. I have other accounts...sigh).
If you talk to retail 'traders' or stock players, most of them take a while to understand selling a stock short, forget about derivatives in both directions that can be either bought or sold simultaneously. Those with more experience readily acknowledge that selling options is where the consistent money is at, but they usually feel it is complicated and dangerous. That you would be competing with professionals (which of course you are always in any trade in any direction). And then there are those few who have the knowledge, time, patience and capital base to engage in option selling full time and perhaps make spectacular returns on a regular basis over the long term. But it is NOT easy. Ask the people here.
You are right that this is an obvious inefficiency that one would think in the world of 'efficient' markets would at some point be exposed and corrected. But markets are not efficient. They only claim to be. And there is tremendous systemic stacking of the deck to keep it the way it is right now.
